Pending home sales drop accross the country because tax credit ends

Pending home sales plunged 30.0% in May, a larger decline than expectations. Over the last 12 months, pending home sales have fallen 15.6% versus a 24.6% year-over-year gain in April (based on the not seasonally adjusted data).

Pending home sales fell in every major region—sales fell in the Northeast by 31.6%, in the Midwest by 32.1%, in the West by 20.9%, and in the South by 33.3%.

BOTTOM LINE: The drop in pending home sales, while larger than expected, reflects the end of the homebuyers' tax credit for contract signings. This was predictable.  Existing home sales should also fall sharply in the months ahead but the timing of that decline will likely be smoothed by the extension of the deadline for contract closings (which has been passed by Congress and sent to the President to be signed). We will send out an update of our Housing Monitor later today.

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